With 2022 behind us, it's a great time to review the year's winners and losers. Regarding the winners, it's tempting to assume that, because a stock outperformed meaningfully last year, it's likely to perform poorly over the long haul. That's because underperforming sectors may likely catch up while outperforming sectors give up some gains. But the opposite can sometimes be true: Some winners keep on winning over the long haul.
One winner that appears poised to keep performing well in 2023 and beyond is soft-drink and snack company Coca-Cola (KO +0.84%). Despite crushing the S&P 500 last year, the stock still looks attractive enough for shareholders to hold on to their shares. With a robust dividend yield and prospects for meaningful earnings growth in the years ahead, this dividend stock gives investors a lot to like.
NYSE: KO
Key Data Points
A dividend-paying powerhouse
While a company's stock should never be valued based solely on its dividend, Coca-Cola's long and exceptional history of dividend growth makes its dividend alone a major reason to own the stock. First, consider Coca-Cola's meaningful dividend yield. Based on the stock price at the time of this writing, the current dividend yield is almost 2.9%.
This brings us to our second point about Coca-Cola's dividend. A 2.9% dividend yield arguably understates the payments investors will receive in the quarters ahead, as the company has a long history of consistently increasing its dividend every year for the last 60 years -- and 2023 likely won't be an exception. The company's last dividend increase announcement was in February 2022, and another dividend hike announcement will likely occur in February of 2023.
Business momentum
Looking beyond Coca-Cola's dividend, underlying business momentum is another reason shares are worth their price-to-earnings ratio of 28. Third-quarter revenue, for instance, increased 10% year over year. Over the same time frame, earnings per share increased 14%.
This strong performance is notable for two reasons. First, it's impressive in and of itself. Second, it highlights how Coca-Cola can continue delivering strong results, even during a difficult macroeconomic environment. This resiliency means Coca-Cola can continue generating strong cash flow in pretty much any market.
Scale is an advantage
Looking ahead, Coca-Cola is likely to continue executing well for investors. The company's size has helped it build important competitive advantages, which will likely help it continue growing earnings meaningfully for years to come. Further, it would be difficult for competitors to erode these advantages, as they're directly related to the company's massive size and sprawling distribution.
Coca-Cola's management team often cites several areas of focus that help it win in the marketplace -- all of which benefit from scale. The first is the company's ever-growing stream of consumer insights. Another is Coca-Cola's globally scaled marketing campaigns. These effective campaigns leverage consumer insights across many markets, helping the company achieve a high return on marketing investment.
Finally, Coca-Cola often references its "pervasive distribution system." The company's sprawling and efficient distribution channel means its partners have a consistent and reliable flow of product supply to resell and support their businesses. Coca-Cola constantly invests to grow this distribution footprint, continually improving its scale advantage.
Coca-Cola's business looks well-positioned to continue its steady growth, providing investors consistent dividend growth and likely strong share-price appreciation over the long haul, too. This is the type of business an investor wants in their portfolio during uncertain times.
